KN - Knowles: Stable Results
2024-06-18 09:27:30 ET
Summary
- Knowles posted solid results at the top and bottom-line all considered, which were in line with my expectations.
- Looking ahead, there's a good amount of opportunity to capture more sales and margins from various internal initiatives like pricing within Cornell Dubilier.
- At today's mid-$17/share, I continue to think Knowles offers an attractive risk/reward over the coming years.
Introduction
Knowles ( KN ) posted a fairly solid quarter in Q1, a trend pointing in the right direction, with the biggest concern - at least on my end - in the macro starting to seemingly stabilize. They can be a decently lumpy business, and so I don't want to read too much into one quarter, but broadly speaking, I continue to think Knowles's future is positive with secular tailwinds across the business. Some risks still remain with capital allocation being most notable - coming in the form of fire-sale risk and M&A risk - but with sales growth justifiable looking ahead and the inherent operating leverage, I think investors can still earn decent returns at ~$17-18/share, up from the low-$15/share a few months ago.
Precision Devices: Stable
As a reminder, Knowles's Precision Devices ((PD)) segment sells RF filters and capacitors into essentially 4 different verticals - healthcare, where they mostly sell to MRI and pacemaker manufacturers; automotive, where they sell ceramic capacitors to EV suppliers; defense, where they sell into both new equipment and upgrades - e.g., F-35 program; and then various industrial end-markets via distributors. PD sales came in at ~$74M in Q1, up ~38% from the ~$54M posted in Q1 last year and up nearly 6% from the ~$70M posted in Q4 2023....
Knowles: Stable Results